Oil prices drop ON FRIDAY, world oil prices dipped below $54 a barrel with the easing of supply concerns that had driven the market up to a record $60 a week earlier. New York's light sweet crude for delivery in May finished at $53.32 a barrel. In London, the price of Brent North Sea crude oil for delivery in May was sold for $52.89 a barrel. Meanwhile, senior officials at the Organisation of the Petroleum Exporting Countries (OPEC) decided that there was no need for an immediate output increase after the drop in oil prices. However, OPEC will still carry out a 500,000 barrels per day increase starting in May 2005, which it had approved during its meeting early last month in Asfahan, Iran. Last month, world oil prices surged to nearly $57 a barrel. The price continued to jump until it reached $60 a barrel early last week, before it dropped back to more sustainable levels. "The prices are already high enough, or maybe too high and we want to bring them down to a moderate level," said OPEC Acting General Secretary Adnan Shihabeddin who added that the organisation has speeded up the expansion programme and currently has about two million barrels a day in spare capacity and planning to bring that to three million in spare capacity by the end of the year to meet additional demand. At the moment, OPEC is trying to counter the fear factor that drove oil prices to exceptional highs. "The fear factor and the speculation about this fear factor drove prices to $60 a barrel," he said. The price of oil is currently about 50 per cent higher than it was a year ago. A statement by the International Monetary Fund indicated that further rises in oil prices would deliver a serious blow to global growth. Slow-growing, developed economies such as Japan and the EU are particularly vulnerable to recession. Shihabeddin noted that the supply was not the problem but the critical factor is the lack of refining capacity in consuming countries. OPEC is now working with the "new consumers" such as China and India to increase their capacity in refining crude oil. Oil consumption in China is expected to grow by 10 per cent in 2005 from its current seven million barrels a day. Nevertheless, energy traders are worried about the world's limited excess production capacity, which they say leaves the global oil market more vulnerable than usual to supply disruptions. Global demand will average more than 84 million barrels a day, according to various industry estimates, while spare output capacity is believed to be about 1.5 million barrels. Meanwhile, OPEC is expected to bring its target price for oil to $50 per barrel. The organisation earlier this year abandoned a target price of between $22 and $28 for crude oil as being "unrealistic". "There is a minimum that can meet the needs for additional investment and also steady revenues. It also has to be acceptable to global economic growth. Fifty dollars a barrel seems to be in that direction," Shihabeddin said. Raya going public RAYA Holding is set to go public in a month's time. Company management recently announced that LE400 million worth of shares will soon be traded on the Egyptian Stock Exchange. Half of that amount will be made available to the public while the remainder will be a capital increase limited to current shareholders. Currently, the company has only 90 shareholders, but they will be joined by thousands more following the move, said Medhat Khalil, CEO of Raya Holding. Thirty per cent of the company's 22.2 million shares will be available through an initial public offering amounting to some 6.5 million shares at a price ranging between LE27 and LE30. The aim of this is to finance the company's expansion. The money is needed by the company for its expansions in Algeria, where company activity, previously carried out through a local partner, has reached a level where the company has decided to be present in the market itself, said Khalil. Moreover, Raya has partnered up with the National Bank of Egypt to invest LE60 million in a jointly owned company which will provide IT services to the banking sector. Raya also aims to invest in the Qatari market, and is considering branching out into the Sudanese and Libyan markets. Raya Holding revenues reached LE1.129 billion in 2004, compared to LE775 million the year before, a growth of 46 per cent. Its profits also soared from around LE5 million in 2003 to LE29 million in 2004. The bulk of these profits, 65 per cent, came from the distribution activities of the company, 32 per cent from the information technology division and only three per cent from the telecommunications division. However, that is expected to change, said Khalil, adding that he expects greater revenue from the telecom division particularly with the liberalisation of the telecom sector by the end of the year. He explained that profits in that area have been low because investment was high. "Only this year is the company breaking even in the area of telecommunications services," he said. Last year LE50 million in telecom services were carried out abroad, and the company is targeting LE80 million for 2005. Developing Sinai A REGIONAL programme to develop South Sinai was launched a week ago. The five-year programme, funded by some 64 million euro from the European Commission (EC), aims at creating a balance between the governorate's expansion of luxury tourism projects and the protection of the natural resources and fragile environment of South Sinai. The programme was devised after consultation with all concerned parties during a conference held last September, where more than 300 representatives from local and regional governments, national authorities, Bedouin communities, tourism and business investors and civil society exchanged views on the best way to develop the governorate. The South Sinai governorate accounts for around 25 per cent of all tourist arrivals in Egypt, hosting 2.6 million tourists in 2003. The surge in tourism and population has created major pressures on the infrastructure of South Sinai. Overuse, particularly in the Sharm El-Sheikh area, is damaging the area's vulnerable marine environment. In the meantime, other tourist attractions such as Saint Catherine's Monastery are under-utilised. Tourism development at emerging sites such as Saint Catherine must be carefully managed to avoid the haphazard construction that has plagued other areas. The first regional programme of its kind to be implemented by the EU in Egypt, it was signed by the EC Ambassador Klaus Ebermann and the governor of South Sinai, Mustafa Afif, as well as Fayza Abul-Naga, minister of international cooperation. The programme will not only provide environmental protection through water resource management and flood protection as well as development of protected areas, but it will also provide for social and local development through the improvement of educational facilities, health services and housing. It will also support the local Bedouin communities through the strengthening of municipal services for water, sewage, collection and recycling of solid waste and electricity in the cities, villages and rural settlements. The idea behind this development is that without appropriate planning, controls and supporting infrastructure services, public awareness and institutional strengthening, the growth that has been achieved may not be sustainable in the longer term and their benefits will not be shared by the entire region. Regulating competition PREPARATIONS are underway for the implementation of the new competition law by mid-May. The prime minister has formed a working group made up of Egyptian experts, as well as experts from the EU and UN Conference on Trade and Development, to prepare for the establishment of the Competition Agency which will oversee the implementation of the law approved by parliament two months ago. The tasks of the working group include the preparation of the executive charter of the law, scheduled to be issued a month following the law's activation. Ten of the law's articles will be explained in the executive charter. The working group will also outline the administrative and employment structure of the agency. The group has prepared the job description of the various cadres needed, including the head of the agency. Training will be provided for everyone to be employed by the agency. The working group will also be in charge of preparing an accurate data base of the various sectors of the economy. Egypt is the 118th country in the world to introduce a competition law.
